SA's contribution to global decarbonisation

  • Annual PwC analysis finds the steepest decline in global carbon intensity since 2000.
  • For South Africa, the 3.2% gap between business as usual carbon intensity (1.5% per year) and the target line (4.7%) is ambitious, and it is starting from a very high base (the highest of the G20). 

The seventh annual Low Carbon Economy Index models major economies’ carbon intensity - the measure of energy related greenhouse gas emissions per million dollars of GDP. It shows global carbon intensity has fallen by 2.7% in 2014, the steepest decline in seven years of the PwC analysis.  Global growth of 3.2% in 2014 was achieved with only 0.5% growth in energy related emissions. Breaking the link between emissions and economic growth – or ‘uncoupling’ – is essential to avoid the worst impacts of climate change.  Despite progress by some countries, globally, the target level of reductions in greenhouse gas emissions per unit of GDP has been missed for the seventh successive year. Rapid and sustained decarbonisation of around 6.3% is needed every year globally in order to limit global average temperature rise to 2°C.

The United Nation’s 21st Conference of the Parties (COP 21) is the culmination of four years of talks and should be a historic and durable deal. This deal should also help to achieve the Sustainable Development Goals which governments agreed to at the UN summit in September 2015.  In many respects, the COP21 summit will just signal the start of a global long term economic and energy transition. 

Jayne Mammatt, Sustainability and Climate Change Director, PwC South Africa,

comments: “It is expected to have far reaching implications for the business community, affecting energy, transport, ICT, heavy industry, agriculture and finance, with a step change in investment, regulation and markets.”

PwC’s analysis highlights the following regarding South Africa’s current and intended contribution to global decarbonisation:

  • South Africa’s GDP in 2014 was US$704bn having grown by 54% since 2000. On average the economy grew at 3.1% per year with only one year of decline; 1.5% in the 2009 recession. Looking forward, South Africa is forecast to grow faster averaging 3.8% growth annually to 2030.
  • South Africa’s energy consumption of 127 Mtoe in 2014 is comparable to fellow coal giant Australia’s 123 Mtoe and only one seventh of India’s. The mix of fuels has been roughly stable for a while: 71% coal, 23% oil and 3% each for gas and nuclear.
  • South Africa relies on coal fired power stations to produce approximately 90% of its electricity, and over time reduction in this percentage is aimed for, with a move to greater use of renewable energy sources.
  • Wind and solar contributed half a Mtoe or just under half a percent to South Africa’s energy mix in 2014, and the same came from hydro and geothermal.
  • By sector in South Africa, power contributed 59% of emissions in 2012, industry 22%, transport 12% and buildings 7%.
  • Carbon intensity actually rose in five countries: South Africa, India, Brazil, Saudi Arabia and Turkey.  For South Africa, carbon intensity follows an erratic pattern ranging most abruptly between 2003 and 2005 where it increased by 2.3% and then fell 5.8%. This pattern is influenced more by emissions than GDP.

Mammatt continues: “The range of 398 and 614 MtCO2e by 2025-2030 is a wide one, so its implied decarbonisation rate could be anything between 3.3% to 5.9% a year. This could bring some uncertainty to businesses in South Africa expecting carbon regulations, as the room for manoeuvre is significant.

“Notwithstanding the uncertainty, the more ambitious target of 398 MtCO2 would mean a decarbonisation rate close to the global rate required of 6.3%, making South Africa’s INDC an ambitious one, but even at 3.3% it will be decarbonising marginally faster than the average of the INDC targets we have examined.”

Many countries have put regulation of coal front and centre of their plans and are setting targets for renewables and low emissions vehicles.  This is true for South Africa – of particular note being the move towards a national carbon tax.  The Draft Carbon Tax Bill was released for comment in November 2015.  The aim is to introduce the carbon tax in a phased manner, with the first phase running from the commencement of the regime until 2020.  The tax forms a part of South Africa’s national response and will have implications for business, alongside mandatory carbon emissions reporting, company level carbon budgets and up-scaled national adaptation and mitigation programmes.  This situation also presents a number of possible opportunities, including:

  • South Africa’s Intended Nationally Desired Contribution (INDC) proposes significant investments that require international support up to 2030, for example:
    • Over $40bn per year would be required in next generation vehicles, split three quarters for hybrid electric vehicles and one quarter electric vehicles. Just less than half a billion per year would also be required for public transport infrastructure.
    • $8bn per year would be needed in renewables and nuclear, including beyond 2030.
    • The estimated cost to expand REI4P is $3bn per year.
  • Renewable power capacity equivalent to all of the offshore wind turbines in Europe today is expected from the Renewable Energy Independent Power Producers Procurement Programme (REI4P) launched in 2011 by the Department for Energy, the National Energy Regulator of South Africa and Eskom.
  • The SA Green Fund received a $66m initial injection, set-up by the Development of Bank of South Africa (DBSA) on behalf of Department of Environmental Affairs.
  • Adaptation programmes require nearly $7bn of short term investment over the next five years,
    for example:Water Conservation and Water Demand Management estimated: $5.3bn
    • Working for Water (WfW) and Working on Fire: $1.2bn
    • Working on Wetlands: $0.12bn
    • LandCare: $0.07bn

The business community has already begun to respond to the global climate change priority, as evident in the South Africa Carbon Disclosure Project results examined over the last 8 years.  However, more will be expected going forwards, as the global goals are significant.

Jayne Mammatt concludes: “Despite being a step change, the Paris targets fall short of the 2°C goal, so the Paris agreement will need a process to review national progress and to raise ambition in future. Companies need policies and regulations that are business friendly and based on market mechanisms.  Such policies will help them to scale up clean energy and energy efficiency, encourage conservation of natural resources, and provide the right incentives to drive investment in low carbon technologies – to build resilience into communities most affected by climate impacts.”

Notes

  • Carbon budget: The target is an estimate of how much countries need to reduce their energy related emissions by, while growing their economy, in order to limit global warming to 2°C.  2°C of warming is the limit scientists agree is needed to ensuring the serious risks of runaway climate change impacts are avoided.
  • 2014 is the first year we have seen more than one country achieve a rate of 6% or above, with five countries reaching this threshold, as well as the EU as a whole. The UK leads the index with a remarkable 10.9% decarbonisation. France was not far behind, and actually reduced carbon emissions by slightly more than the UK but experienced slower GDP growth. Italy and Germany posted very strong decarbonisation rates.  Although Italy’s emissions fell rapidly, its economy also contracted slightly.  Germany however achieved fairly rapid emissions reductions as well as economic growth of 1.6%.  China also recorded a rapid decarbonisation rate.  And while Australia has slipped from the top spot, it still recorded a decarbonisation rate of 4.7%.
  • Under the UN climate negotiations process, all countries are expected to put forward their pledges (Intended Nationally Determined Contributions or INDCs) with the collective aim of reducing greenhouse gas emissions globally to limit the potential for global warming to 2°C by 2100.
  • A 3°C world is one in which the IPCC’s Fifth Assessment Report describes potential impacts including ocean acidification and frequent heatwaves and drought challenging global food supply and trade with knock on effects for migration and conflict.  Furthermore there is potential that rising numbers of species face extinction, and more frequent extreme weather events will cause infrastructure damage, loss of life and business disruption
  • About the Low Carbon Economy Index (LCEI): The LCEI model combines energy-related carbon dioxide emissions with historic and projected GDP data, and the IPCC’s carbon budgets.  The model covers energy and macroeconomic data from individual G20 economies, as well as world totals. Details of our model structure are available the Appendix of the LCEI report. The analyses of the Paris targets are based estimates of the decarbonisation rates implied by the INDCs submitted to UNFCCC and include the full national inventory of emissions (i.e. emissions from land use change, forestry, and industrial process). 

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